Mehrotra examines the factors contributing to the introduction of the corporate income tax in 1909 and of the individual income tax in 1913. According to the conventional wisdom, these taxes were the products of politics, political institutions, and social forces; economic factors play a cameo role in the standard historical accounts. He argues that economic developments were as significant as political and social factors in the enactment and development of the taxes. The corporations created the wealth that became the targets of the corporate and individual taxes. Here, he investigates two particular economic factors. First, he explores the broad, long-term, structural transformations in the American economy that fostered the development of the modern progressive income tax. Between the end of Reconstruction and the onset of the Great Depression, the American economy underwent dramatic changes. The second set of economic factors that facilitated the development of the modern income tax followed from the first.

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